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Sunday, March 12, 2006

Tax proposal that reduces productivity

A University of Michigan professor turns success into a problem. And he has a "solution" to reduce the hard work that results in success. A tax on people who work hard. But it is for their own good.
You know by the length of his job title that he is at the pinnacle of success. Joel Slemrod, Paul W. McCracken Collegiate professor of business economics and public policy at U-M's Stephen M. Ross School of Business and director of the Office of Tax Policy Research says in a U of Michigan news release:

"High-income, highly educated people are particularly likely to suffer from workaholism with regard to deciding when to retire—going cold turkey on their addictive behavior..."
Workaholism, he says, has been linked to a variety of health problems, including exhaustion, stress and high blood pressure, and can take an emotional and mental toll on a worker's family.

... Using data from U-M's Retirement History Survey and Panel Study of Income Dynamics, Slemrod and colleague Daniel Hamermesh of the University of Texas found that workers with more education are less likely to follow through with their intended plans to retire. In fact, each additional year of schooling reduces the likelihood of being fully or partly retired by about as much as one-third of a year's increase in the planned age of retirement.

"The results suggest that certain more educated and higher-income respondents simply cannot help themselves," Slemrod said. "They express an expectation of retirement, but when the time comes, they are less likely to be retired."

Since they can't help themselves Professor Siemrod finds he is needed.

According to the study, workaholics misjudge the benefits and costs of working more hours in their careers and working beyond their intended retirement date.

If he had stopped with that economic analysis I could accept it. But he suggests to slow down some of the most productive people in our economy by taking money out of their pockets.

Unlike cigarette excise taxes, which are highly regressive (those with lower incomes pay a greater proportion of income in taxes), the appropriate corrective policy for workaholics—who tend to make more money—might involve a more progressive income tax burden (those with higher incomes pay a higher proportion of income in taxes) than otherwise, Slemrod says.

Will his tax hit only workaholics? No. It will hit every successful hard-working person and penalize their efforts -- and their success. Many of these successful people are not workaholics. They have jobs with a lot of responsibility and can see the results they produce. They know that people benefit from their work.
An MD I know can't find a way to work a comfortable 35 to 45-hour week. Calls come in that he can't turn down, so he usually works 55 to 60 hours a week. He is not a workaholic, but a responsible leader of his practice and responsive to his patients - yes, I am one of them. Prof Siemrod would put a marginal tax rate of 70% on him and leave him with only 30 cents of a dollar he earns. The 70% is a guess because he conveniently forgets to say what his high tax rate would be.I thought it was only assistant and associate profs that were desperate to come up with a novel idea so they could publish. Siemrod is a very senior full professor; he has no need to attract attention to himself. He is influential on tax policy and is serious about taxing successful people.